After President Joe Biden signed the American Rescue Plan Act of 2021 in March, he paved the way for millions of Americans to receive stimulus checks, child care credit, and more. But arguably one of the most impactful aspects of the bill centered on restaurants and other food service providers that have been hit extremely hard by the coronavirus pandemic.

Indeed, the American Rescue Plan Act of 2021, which tallied $1.9 trillion in stimulus funding, set aside $28.6 billion in grant money under Section 5003, Support for Restaurants. And for many food service providers, it could go a long way in helping them reestablish their businesses and come out the other side of the pandemic financially healthy.

Read on to learn more about the grant, which companies qualify, and how food service providers can obtain their much-needed grant money:
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Which companies qualify for the Restaurant Grant?

In order to take advantage of the Support for Restaurants program, entities must fit into one of the handful of eligible categories. Here are the companies that do qualify for the program:

• Restaurants
• Food Stands
• Bars, Taverns, Inns, and other similar establishments
• Caterers
• Food service providers in an airport terminal or Tribally owned
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‍Which companies do not qualify for the Restaurant Grant?

Although the list of eligible companies is quite expansive, the bill is quick to identify the companies that do not qualify for the program. They include:

• Any of the above that are owned by a government entity
• A publicly traded company
• A business with more than 20 locations as of March 13, 2020
• Any business that has an applicate for, or has received, a Shuttered Venues Grant Program grant

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How the Restaurant Grant works‍

The Support for Restaurants program is designed to provide eligible companies (see above) tax-free support to help them rebuild their businesses. The eligible entity is able to determine its qualified grant amount by subtracting its 2020 gross receipts from its 2019 gross receipts. That amount, called the Pandemic-Related Revenue Loss, is the amount allowed through the grant program, up to a maximum of $10 million.

If the qualified entity was not in business for all of 2019, it may take the difference between the annualized monthly gross receipts of 2019 and the annualized monthly gross receipts of 2020.

Any entity that opened in 2020 that qualifies for the program is allowed to subtract their payroll costs from their 2020 gross receipts to arrive at a qualified amount. Any other entity that hasn’t yet opened but has incurred expenses and plans to open, may also get a grant for the amount of its expenses.‍

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How to calculate your maximum grant amount‍

After computing the above, entities can conclude the amount of their grant. However, the program limits entities to a total of $10 million in grant funds. Entities with multiple locations are limited to $5 million per physical location.‍

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How you can use the Restaurant Grant‍

Although the funding is a grant and therefore available to an entity at its discretion, the program does provide for some limitations. Chiefly, the funds should be used to pay for expenses and other qualified costs that would have been, or will be, incurred between the period of February 15, 2020 and December 31, 2021.

Moreover, the grant funds should be used for the following through that period:

• Payroll
• Mortgages
• Rent
• Utilities
• Maintenance expenses
• Food and beverage expenses
• Supplier costs
• Ongoing operations
• Employee paid sick leave
• Any other essential expenses

When you’ll get the Restaurant Grant

When you’ll be eligible for the grant depends on the size of your business.

To aid smaller companies, the relief bill calls for the first $5 billion in grants to be made solely to eligible entities that had less than $500,000 in gross receipts in 2019. The remaining $23.6 billion will be distributed to all other companies.

Additionally, the bill calls for the Small Business Administration (SBA), which will be managing the program, to focus first on small businesses and entities owned by women, veterans, and socially and economically disadvantaged individuals.

Tax treatment on the Restaurant Grant‍

Eligible restaurants may receive the grant tax free. Entities that receive funds do not need to include it in their gross receipts, but will need to certify that the funds are necessary and required to support their operations.

For more on the Support for Restaurants Program or the larger American Rescue Plan Act of 2021, please contact your Perlson LLP professional at 516-541-0022. We’d be happy to consult with you on your unique situation and how you may be impacted by the new stimulus bill and the restaurant grant program.